I would NOT give him any warning. He should know you and know that you are going to protect your children. If he has warning, his parents might help him do something with your kids and shut you out. Get your plan, ducks in a row and move. Then offer to meet with him in a neutral place and lay down the law...only after you have secured a safe place for you and your children and taken care of finances so he is responsible for any bills he incurs from that point on except IRS.
I sort of agree with this.
I would give DH a chance (faced with facts in the clear light of day, he might move himself out of the shadow of denial), BUT...by giving him an ultimatum, you're tipping your hand. If you decide to give him the oprotunity to help you and the kids get out of this, you need to be prepared to act instantly if he turns you down. As in you leave after talking with him, grab the kids, and take off.
BEFORE you do this you
MUST talk to a lawyer, just taking off with the kids may cause more problems than it solves. You need to find out what you are and are not allowed to do, prepare to leave in a way that follows the law and preserves your ability to fight for custody in the future, and ONLY then talk to your DH and give him a choice. Because once you tell him "do what I say or I'm gone" he knows what's up and if he isn't willing to submit to your demands, he will run straight back to mommy, daddy, and the $$$ that will buy the best divorce lawyer in the state.
Also be prepared for him to say that he will do what you want, thinking to give you a false sense of security and get you drop your guard, and then double cross you. IF he agrees to your demands, as the old saying goes "Trust, but verify". Part of your demands on him should be that you have the right to check up on him and find out if he's holding up to his end of the bargin. Let him know the first time he baulks at you asking him about whatever, or the first time you catch him in a lie, will be the last time and your gone. Then follow through and go.
In short, your very next step is to find the biggest, meanest, pitbull lawyer you possibly can and find out what your steps are for leaving (throw it on a credit card if you don't have the cash, worry about the money later. This also has the benifit of blocking your DH from getting the best lawyer in town, once the lawyer speaks to you, he/she CAN'T take your husband as a client, even if you use another lawyer for the actual divorce). Then do all the prep work to take off in an instant if needed.
ONLY when you have this escape plan in place do you speak to your DH and give him the ultimatum. You need to be willing and able to act upon that escape plan the moment you feel that your DH is going to choose his parents and brother over his wife and kids, and that moment may come at any time over the next few days, weeks, months, or even years. Your husband may be strong at first, but as his family wears him down, it's entirely possible that he caves at a laver date.
I am hoping he's just in denial about his family. Who would want to admit they have a pedophile for a brother and parents and other family that know it and protect him? But if when faced with sticking by his brother and parents and losing his wife and kids, he can't make the right choice, well...then you have your answer on what you need to do next.